Stocks on rise as bond market pressure relaxes
NEW YORK — U.S. stocks rose Tuesday after pressure relaxed on Wall Street from the bond market.
The S&P 500 gained 22.58, or 0.5%, to 4,358.24. The Dow Jones Industrial Average rose 134.65, or 0.4%, to 33,739.30, and the Nasdaq composite climbed 78.60, or 0.6%, to 13,562.84.
Some of the strongest action was in the bond market, where Treasury yields eased after trading resumed following a holiday on Monday. It was the first opportunity for yields to move since the weekend’s terrorist attack by Hamas on Israel injected caution into global markets.
Perhaps more impactfully, it was also the first trading for Treasurys since speeches by Federal Reserve officials that traders took as a suggestion the Fed may not raise its main interest rate again. The comments helped U.S. stocks swing from early losses to gains on Monday.
The yield on the 10-year Treasury fell to 4.65% from 4.80% late Friday, which is a considerable move for the bond market. The two-year Treasury yield, which moves more closely with expectations for the Fed’s actions, sank to 4.97% from 5.09%.
Treasury yields had jumped last week to their highest levels in more than a decade, following the lead of the Fed’s main interest rate, which is at heights unseen since 2001. They’ve been the main reason for the stock market’s stumbles since the summer, as worries rise that the Fed will keep its federal funds rate at a high level for longer than Wall Street hopes.
High rates and longer-term yields knock down prices for stocks and other investments, while slowing the economy in hopes of undercutting high inflation.
But the swift rise in the 10-year Treasury yield has helped pull the average longterm mortgage rate up to its highest level since 2000, and Fed officials have intimated such moves may help contain high inflation on their own.
“I actually don’t think we need to increase rates anymore,” Raphael Bostic, president of the Federal Reserve Bank of Atlanta, said in remarks before the American Bankers Association on Tuesday. “I think we are at a good place in that regard.”
A day earlier, two other Fed officials made statements that traders saw as a hint that no more rate hikes may be coming. One was Philip Jefferson, who is the Fed’s vice chair. The other was Dallas Fed President Lorie Logan, who has been among the more “hawkish” Fed members pushing for tough interest rates to battle high inflation, said Solita Marcelli, chief investment officer, Americas, at UBS Global Wealth Management.
The Fed’s next announcement on interest rates is due Nov. 1. Traders are now betting on a nearly 73% chance that the year will end without any more Fed rate hikes, according to data from CME Group. That’s up from the 53% chance seen a week ago.
The International Monetary Fund on Tuesday lowered its forecast for global economic growth next year, in part because of the effect of high rates around the world, though it upgraded its forecasts for U.S. economic growth specifically.
Fighting in Gaza is the latest threat for the world’s economy, particularly after it pushed oil prices higher on Monday. While the region under conflict doesn’t produce much oil, the fear is that the violence could spill over into the politics surrounding the crude market. That in turn could hurt the flow of petroleum.
A barrel of U.S. crude fell 41 cents to settle at $85.97, giving back a bit of its $3.59 leap a day before. Brent crude, the international standard, fell 50 cents to $87.50 per barrel.
PepsiCo rose 1.9% after it reported stronger profit and revenue for its latest quarter than analysts expected. The snack and drink company charged higher prices for its products during the quarter, which helped to make up for a drop in how much it sold. It also raised its forecast for profits for the full year.